Wednesday, February 25, 2015

Macht ohne Kontrolle - Die Troika

Yesterday evening I saw on Arte television a very good documentary about the uncontrolled power of the Troika (European Commission, ECB and IMF).
The original title is "Macht ohne Kontrolle - Die Troika".During a week you can see the documentary on internet by clicking HERE. (I noticed the link did not work anymore; HERE is another link.

I don't know if there is a subtitled version in English, Spanish of French. The narrator of the film is investigative journalist Harald Schumann and it is directed by Arpad Bondy.

Tuesday, February 24, 2015

In Analyze Greece appeared on 22 February 2015 an interesting article by Manolis Melissaris that sheds light on the strategy of the new Greek government in its debt talks with European finance ministers. One of its aims was to change the terms of the debate. According to Melissaris the Greek government has succeeded in introducing a democratic and social agenda in the technocratic discussions.

So a Eurogroup deal has been struck and the hatchets are buried under a thin coat of dust for now. What are we to make of this?

SYRIZA’s top realistic priorities seem to have been, or at least should
always have been, the following. First, to relax austerity to the
highest degree possible and thus address the humanitarian crisis.
Secondly, to get some breathing space which would allow the government
to implement its fiscally neutral (though of course not fiscally
indifferent) social agenda. Thirdly, to push mainstream political
discourse in Europe in a new direction.

The deal does not fully achieve the first aim and being overjoyed about
the deal in this respect is probably ill advised. Austerity will still
have to be practiced and many of the measures might still be largely at
the expense of the lower and middle social strata. This is not the whole
story though. That the Greek government can now autonomously determine
reforms, unlike any other government of the crisis years, means that it
can redirect reforms in a way that shifts burdens towards those who have
remained unaffected both by the crisis itself and the policies of the
past five years. At the time of writing this brief comment the proposed
reforms have not been announced so the jury’s still out on this.

The aim of implementing the social agenda must still be pursued and it
must be achieved. The government’s mandate is not exhausted in the
immediately urgent issue of debt. This may have, disappointingly,
monopolised political discourse in Greece for a long time, but it is
only part of the picture. Immigration, security and penal policy, human
rights, the structure of political discourse, the regulation of media
ownership, the restoration of the rule of law, institutional design and
maintenance and many other issues are just as pressing and significant.
For example, a day after the deal, protesters outside the illegal
immigrant concentration camp of Amygdaleza were dealt with very
heavy-handedly by the police. It is of the utmost urgency that such
practices change.

But what I would like to focus on is the third aim. Many, from the New
Yorker to the Guardian, seem to believe that Greece overplayed its hand
during the Eurogroup negotiations. They say that its initial demands
were maximalistic. Therefore, under the pressure of the blackmail openly
exercised by the German government and its satellites, the inevitable
retreat became a bigger defeat than it could have been.

We should not be too quick to buy into that reading of events and I’ll
explain why. From the very outset, the Greek government emphasised the
predicament of the Greek people caused by the years of austerity. It
highlighted how counterproductive the inequality generated by the
post-crisis economic policy has been. It proposed concrete measures,
which would not have aggravated the fiscal situation. It also
unfailingly flagged up the unequivocal mandate that it had so recently
been given by the Greek people.

When arguing against, and rejecting, the ‘maximalistic’ Greek requests
Germany and its satellites inevitably faced all these claims too. Much
was disclosed in this process. Here are only a few of many examples. As
it was reported, the Spanish and Portuguese governments tried to
undermine the whole deal. They were concerned with things back home.
They did not want to appear to accept that there may be an alternative
to the policies that they have been following, a concession which would
be wind in the sails of domestic opposition. Wolfgang Schäuble tried to
intervene in domestic Greek politics on a number of occasions (feeling
‘sorry’ for the Greek people for having elected an ‘irresponsible’
government and then apparently feeling sorry for the Greek government
for the difficulties it would face explaining the deal to the Greek
people). His move is transparent. He tried openly to blackmail not just
the Greeks but all European peoples and governments and to appear
domestically tough with those who do not share the ‘right’ vision of
Europe. On a deeper level, he was trying to establish that vision of
Europe as the only alternative, therefore one that remains unaffected by
democratic or principled tests. Jeroen Dijsselbloem lost his cool when
Paul Mason, the Economics Editor of Channel 4 News in the UK, asked him
what he says to the Greek people “whose democracy you’ve just trashed”.

What is significant about all this is that it happened within a European
institutional setting. Whereas the same arguments have been made in
civil society and the public sphere at large numerous times in the past,
the Greek negotiation strategy disrupted technocratic discourse with
democratic politics for the first time ever. It forced on the
institutional table the antinomy between democratic legitimacy and
economic power. It highlighted the deepest contradiction of the European
institutional structure: on the one hand distributive policies
presuppose popular sovereignty and, on the other, this is made
impossible by the economic governance of the EU.

This democratic disruption will eventually have systemic effects.
Perhaps through the emergence of the language of democracy and social
justice in official documents, a language which can then play a part in
determining the interpretation and implementation of European policies.
Perhaps through the implementation of the social justice oriented
policies that are not incompatible with the terms of the deal. Perhaps
through the fiscally neutral social agenda, which can at the very least
re-frame the fiscally onerous measures.

But it can also have a short-term, external effect. It can reveal to the
people of Europe that the clash is not between them and the Greeks or
other European peoples but rather between two visions of Europe, one of
which leaves them out of the picture altogether. It can disclose that
domestic democratic politics is not sufficient to counter global
economic forces and that isolationism cannot be the answer. It can make
the need for a European political sphere felt more strongly than ever.
It is telling that, as soon as Schäuble and the rest realised that this
is the way things are going, they engaged in a last minute attempt at
character assassination, at discrediting the Greek government and
presenting its representatives as irresponsible and incompetent. This
was quite obviously an attempt at dragging Greece back into the
technocratic game of efficiency and number-crunching. But it was already
too late for that.

In his address to the Greek people the day after the deal Alexis Tsipras
said that a battle was won but the war is still waging. If this is
really a war, its central theatre is political and the main stake is to
reinstate democratic politics in the heart of Europe. The EU does not
currently have the appropriate institutional structure for the voice of
the people of Europe, now re-animated by the institutional democratic
disruption, to be translated directly into norm-determination. But it
can be heard through social movements, in civil society, in the public
sphere. And this can only strengthen the disruption until it becomes a
rupture.

Manolis Melissaris teaches and writes on legal and political philosophy and criminal law (@EMelissaris)

Tuesday, February 17, 2015

A month ago the Greeks voted against the continuation of the current EU debt 'rescue' programme for Greece and wanted to replace it with a more sensible recovery programme for their country. But the other European governments of the eurozone do not allow the new Greek government to respect the wish of its voters.

"OK, this is amazing, and not in a good way. Greek talks with finance ministers have broken up over this draft statement, which the Greeks have described as “absurd.” It’s certainly remarkable. On my reading, here’s the key sentence:

The Greek
authorities committed to ensure appropriate primary fiscal surpluses and
financing in order to guarantee debt sustainability in line with the
targets agreed in the November 2012 Eurogroup statement. Moreover, any
new measures should be funded, and not endanger financial stability.

Translation (if you look back at that Eurogroup statement): no give whatsoever on the primary surplus of 4.5 percent of GDP.

There was absolutely
no way Tsipras and company could sign on to such a statement, which
makes you wonder what the Eurogroup ministers think they’re doing.

I guess it’s possible
that they’re just fools — that they don’t understand that Greece 2015 is
not Ireland 2010, and that this kind of bullying won’t work.

Alternatively, and I
guess more likely, they’ve decided to push Greece over the edge. Rather
than give any ground, they prefer to see Greece forced into default and
probably out of the euro, with the presumed economic wreckage as an
object lesson to anyone else thinking of asking for relief. That is,
they’re setting out to impose the economic equivalent of the
“Carthaginian peace” France sought to impose on Germany after World War
I.

Either way, the lack of wisdom is astonishing and appalling."

Greece's finance minister Yanis Varoufakis wrote yesterday in an op-ed in The New York Times:

"The
great difference between this government and previous Greek governments
is twofold: We are determined to clash with mighty vested interests in
order to reboot Greece and gain our partners’ trust. We are also
determined not to be treated as a debt colony that should suffer what it
must. The principle of the greatest austerity for the most depressed
economy would be quaint if it did not cause so much unnecessary
suffering.

I
am often asked: What if the only way you can secure funding is to cross
your red lines and accept measures that you consider to be part of the
problem, rather than of its solution? Faithful to the principle that I
have no right to bluff, my answer is: The lines that we have presented
as red will not be crossed. Otherwise, they would not be truly red, but
merely a bluff.

But what if this brings your people much pain? I am asked. Surely you must be bluffing.

The
problem with this line of argument is that it presumes, along with game
theory, that we live in a tyranny of consequences. That there are no
circumstances when we must do what is right not as a strategy but simply
because it is ... right.

Against
such cynicism the new Greek government will innovate. We shall desist,
whatever the consequences, from deals that are wrong for Greece and
wrong for Europe. The “extend and pretend” game that began after
Greece’s public debt became unserviceable in 2010 will end. No more
loans — not until we have a credible plan for growing the economy in
order to repay those loans, help the middle class get back on its feet
and address the hideous humanitarian crisis. No more “reform” programs
that target poor pensioners and family-owned pharmacies while leaving
large-scale corruption untouched.

Our
government is not asking our partners for a way out of repaying our
debts. We are asking for a few months of financial stability that will
allow us to embark upon the task of reforms that the broad Greek
population can own and support, so we can bring back growth and end our
inability to pay our dues."

Friday, February 6, 2015

On January 30th, Paul Krugman wrote in his NYT column: "In the five years (!) that have passed
since the euro crisis began, clear thinking has been in notably
short supply. But that fuzziness must now end. Recent events in
Greece pose a fundamental challenge for Europe: Can it get past
the myths and the moralizing, and deal with reality in a way that
respects the Continent’s core values? If not, the whole European
project — the attempt to build peace and democracy through shared
prosperity — will suffer a terrible, perhaps mortal blow."

Krugman discusses the myth that Athens has
used the rescue package of EU and IMF loans for itself. "The truth, however,
is," he says, "that the
great bulk of the money lent to Greece has been used simply
to pay interest and principal on debt. In fact, (...) to oversimplify
things a bit, you can think of European policy as involving a
bailout, not of Greece, but of creditor-country banks, with the
Greek government simply acting as the middleman — and with the
Greek public, which has seen a catastrophic fall in living
standards, required to make further sacrifices so that it, too,
can contribute funds to that bailout."

Another myth Krugman tackles is that Greece would fully repay its debt. "Now, the truth is," he says, "that nobody believes that Greece can fully repay. So why not
recognize that reality and reduce the payments to a level that
doesn’t impose endless suffering? Is the goal to make Greece an
example for other borrowers? If so, how is that consistent with
the values of what is supposed to be an association of sovereign,
democratic nations?"

Debt reduction would be rational, argues Krugman. "Let Greece run smaller but still positive surpluses, which would
relieve Greek suffering, and let the new government claim success,
defusing the anti-democratic forces waiting in the wings.
Meanwhile, the cost to creditor-nation taxpayers — who were never
going to get the full value of the debt — would be minimal. Doing the right
thing would, however, require that other Europeans, Germans in
particular, abandon self-serving myths and stop substituting
moralizing for analysis."

Krugman's hope has not been fulfilled these past days, when both Greek finance minister Yanis Varoufakis and prime minister Alexis Tsipras asked in European capitals for support to Greece's plan to restructure debt and end austerity.

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

"The only thing we ask for," said Varoufakis in an interview with German public broadcaster ARD on February 4, 2015, "is to give us time until th end of May or the beginning of summer to be able to put our suggestions for a solution on the table so we can talk about them with our partners."

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

“The
only thing we ask for is not to be put under pressure by means of an
ultimatum. To give us time until the end of May or the beginning of
summer to be able to put our suggestions for a solution on the table so
we can talk about them with our partners,” said, Greek Finance Minister
Yanis Varoufakis in an interview with German public broadcaster ARD -
See more at:
http://greece.greekreporter.com/2015/02/05/greek-finmin-varoufakis-the-only-thing-we-want-is-some-time/#sthash.OaQqrgIc.dpuf

Wednesday, February 4, 2015

"I'm the finance minister of a bankrupt country"

The Germans need not trust the Greeks, but should
listen to them, says Yanis Varoufakis. In an interview with ZEIT and
ZEIT ONLINE he promises a big reform programme. Interview: Marcus Gatzke und Mark Schieritz

ZEIT ONLINE: Mr. Varoufakis, in just a few days, you’ve antagonized half of Europe. Was that your plan?
Yanis Varoufakis: I think that’s normal. It will take
some time before it’s been understood everywhere that a very fundamental
change has taken place in the EU. ZEIT ONLINE: Which change?Varoufakis: Europe wasn’t prepared for the crisis in
Greece and made decisions that just made everything worse. Now the EU
resembles a gambling addict throwing good money after bad. We can’t say:
"Stop! Did we do something wrong? Did we perhaps understand this crisis
wrong?"ZEIT ONLINE: Did we? After all, the Greek economy has recently been back on a growth course.Varoufakis: Perhaps if you look at things in purely
statistical terms. But, in reality, incomes and prices are falling. The
existing crisis policies have strengthened political forces on the far
right all over Europe – in Greece, in France, in Italy. We need a change
of course.ZEIT ONLINE: Many Germans fear this is an excuse to dial back reforms.Varoufakis: Germans have to understand that it
doesn’t mean we’re turning away from the reform path if we give an
additional €300 a year to a pensioner living on €300 a month. When we
talk about reforms, we should talk about cartels, about rich Greeks who
hardly pay any taxes. Why does a kilometer of freeway cost three times
as much where we are as it does in Germany?ZEIT ONLINE: Why?Varoufakis: Because we’re dealing with a system of
cronyism and corruption. That’s what we have to tackle. But, instead,
we’re debating pharmacy opening times.ZEIT ONLINE: Many governments have
promised to do something to counter these problems. But little has
happened. So why should people trust you?Varoufakis: You need not trust us. But you should
listen to us. Listen to what we have to say, and let us then discuss it
with an open mind.ZEIT ONLINE: You are new to your
office, and most cabinet members do not have any experience in
government. How do you intend to accomplish everything?Varoufakis: We may be inexperienced, but we aren’t
part of the system. And we will get some expert advice. We’ve approached
José Ángel Gurría, the secretary-general of the OECD, the organization
of industrialized countries. He is supposed to help us put together a
reform programme.ZEIT ONLINE: Your government has rehired thousands of civil servants. Is that the new Greece?Varoufakis: We haven’t hired anyone at all yet. We
have announced that we want to have a look at a series of public-sector
dismissals that were pronounced under questionable circumstances. If we
rehire these people, it will be because the justification for their
dismissal was unconvincing.ZEIT ONLINE: The justification was lack of money.Varoufakis: That doesn’t convince me. For example,
our schools were plundered because the security people lost their jobs.
Is that a sensible cost-cutting measure? We fire the security staff, and
the school’s computers are stolen at night.ZEIT ONLINE: Can these problems not be solved without bloating the state apparatus?Varoufakis: We aren’t bloating it. If we notice that
we have too many people, we will change course and no longer fill
positions when they become empty, for example. When I was still working
at the University of Athens, there was a cleaning lady there named
Anthoula. We often had to work until midnight. Although her workday had
ended much earlier, Anthoula cleaned up after us and unlocked the rooms
for us the next morning. Guess who was let go first as part of the
austerity program? Anthoula.ZEIT ONLINE: Can politics let such individual fates determine its direction?Varoufakis: No. But the example of Anthoula is
emblematic of the situation in Greece. The reforms have been inefficient
and unfair. That is why I’ve also ordered that the cleaning ladies in
my ministry be rehired.ZEIT ONLINE: In other words, those
women who have been protesting their dismissals in Athens for months and
have become a symbol of the crisis?Varoufakis: Exactly. In my ministry, the representatives of the troika...ZEIT ONLINE: … the EU inspectors...Varoufakis: … have been devising the so-called
reforms. These people haven’t dismissed highly paid consultants, for
example, but rather cleaning ladies who cleaned the rooms and toilets at
night. Women over 50 who went home with €500 a month. This decision is
morally reprehensible. And before you ask about it: We will save money
in other places – by not extending the consultants’ contracts.ZEIT ONLINE: During the campaign, Syriza announced a spending programme worth billions. Can it be implemented without new debts?

Varoufakis: It has to. I can promise you: Excluding
interest payments, Greece will never present a budget deficit again.
Never, never, never!ZEIT ONLINE: Why did you have to throw the EU troika out of your country?Varoufakis: What’s the troika? A group of
technocrats who monitor the implementation of the reform programme. We
were elected because we no longer accept the logic of their programmes.
They have ruined our country. The troika doesn’t have a mandate to
negotiate another policy with us. But that does not mean we will no
longer work together with our partners.ZEIT ONLINE: Greece has accepted the conditions of its lenders. The attitude in Berlin is that deals must be kept.Varoufakis: When I hear something like that, I
sometimes think that Europe hasn’t learned anything from history. After
World War I, Germany signed the Treaty of Versailles. But this was a bad
treaty. Europe could have spared itself a lot of suffering if it had
been broken. John Maynard Keynes...ZEIT ONLINE: … the famous British economist...Varoufakis: ...already warned at that time that
driving a country into ruin wasn’t a sustainable strategy. If we believe
that the bailout policies have been a mistake, we have to change them.ZEIT ONLINE: Have they been a mistake?Varoufakis: A huge mistake. Greece collapsed under
its debts. How did we deal with that? We gave even more loans to an
over-indebted state. Imagine one of your friends loses his job and can
no longer pay his mortgage. Would you give him another loan so he can
make payments on his house? That cannot work. I’m the finance minister
of a bankrupt country!ZEIT ONLINE: So, where does that lead us?Varoufakis: We should approach the problems with the
eyes of an insolvency administrator. And what does an insolvency
administrator do? He tries to reduce the debts.ZEIT ONLINE: Germany’s federal government has ruled out a debt haircut.Varoufakis: I understand there are terms that have
been discredited in certain countries. But we can also lower the debt
burden without touching the amount of money owed itself. My proposal is
to peg the amount of interest payments to economic growth.ZEIT ONLINE: So, if the Greek
economy didn’t grow, creditors would have to waive the interest. You’ve
been quoted in German newspapers as having said: "No matter what
happens, Germany will still pay."Varoufakis: The quotation has been ripped from its
context. I did not say that the Germans will pay and that this is a good
thing. I said that they have already paid far too much. And that they
will pay even more if we do not solve the debt problem. Only then can we
refund the money that people have loaned us in the first place.ZEIT ONLINE: Do you believe you’ve been deliberately misunderstood?Varoufakis: I hope it’s only a misunderstanding.ZEIT ONLINE: Immediately after the
election, Alexis Tsipras visited a memorial to those who resisted Nazi
Germany. That has also been understood as a provocation. Is that a
misunderstanding, as well?Varoufakis: The Golden Dawn party has risen to
become the third-strongest force in our parliament. They aren’t
neo-Nazis; they are Nazis. We must fight them, always and everywhere.
Laying down roses on the monument was a message to the Nazis in my
country. It was not a signal directed toward Germany.ZEIT ONLINE: In your view, has Germany become too powerful in Europe?Varoufakis: Germany is the most powerful country in
Europe. I believe the EU would benefit if Germany conceived of itself as
a hegemon. But a hegemon must shoulder responsibility for others. That
was the approach of the United States after World War II.ZEIT ONLINE: What could Germany do?Varoufakis: I imagine a Merkel Plan based on the
model of the Marshall Plan. Germany would use its power to unite Europe.
That would be a wonderful legacy for Germany’s federal chancellor.ZEIT ONLINE: Merkel would say she has a plan.Varoufakis: What kind of plan is that? A Europe in
which we get even more loans that we will never be able to pay back?
Back then, the United States forgave the lion’s share of Germany’s
debts. From the ongoing EU aid programme, there are now €7 billion lying
on the table that I can take just like that. All I have to do is
quickly sign a document. But I wouldn’t be able to sleep well if I did
because it wouldn’t solve the problem.ZEIT ONLINE: As a result, you have another problem: Your money could run out in a few weeks.Varoufakis: That’s why we need a bridging loan. The
European Central Bank should support our banks so that we can keep
ourselves above water by issuing short-term government bonds.ZEIT ONLINE: In doing so, the ECB would be acting on the fringes of legality.Varoufakis: But it wouldn’t be the first time that
it took up such a task. And it’s also not about a long-term solution. We
will have our plan ready at the beginning of June.ZEIT ONLINE: Will you ask Russia for help?Varoufakis: I can give a clear answer to that: That is not up for debate. We will never ask for financial assistance in Moscow.This interview has been edited and condensed for length and clarity. This is the English translation of the original German version.

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org